Managerial Economics

Question 1

Value added (2 answers) =

Answer 1

Buyer benefit - Seller cost

Or

Buyer Surplus + Seller Economic Profit

Question 2

‘The difference between the buyer’s benefit and their expenditure’ =

Answer 2

Buyer surplus

Question 3

‘The difference between the revenue that the seller receives and the cost of production’ =

Answer 3

Economic profit

Question 4

The two fundamental decisions in business:

Answer 4

1. Participation (‘which’)

2. Extent (‘how much’)

Question 5

‘The total value of the variable divided by the total quantity of the measure’ =

Answer 5

Average value

Question 6

‘The change in the variable associated with a unit increase in a measure’ =

Answer 6

Marginal value

Question 7

‘A procedure to transform future dollars into an equivalent number of present dollars’ =

Answer 7

Discounting

Question 8

‘The sum of discounted values or inflows and outflows over time’ =

Answer 8

Net Present Value

Question 9

‘The rate of production or delivery of a good or service’ =

Answer 9

Scale

Question 10

‘The range of different items produced or delivered’ =

Answer 10

Scope

Question 11

The ________ boundaries of an organisation delineate activities closer to or further from the end user. By contrast, the ________ boundaries of an organisation are defined by the organisation’s scale and scope.

Answer 11

1. Vertical boundaries

2. Horizontal boundaries

Question 12

‘A time horizon in which a seller cannot adjust at least one input’ =

Answer 12

Short run

Question 13

‘A time horizon long enough for the seller to adjust all inputs, including possibly entering or exiting the industry’ =

Answer 13

Long run

Question 14

‘The cost of inputs that do not change with the production rate’ =

Answer 14

Fixed cost

Question 15

‘The cost of inputs that do change with the production rate’ =

Answer 15

Variable cost

Question 16

‘The sum of fixed cost and variable cost’ =

Answer 16

Total cost

C = F + V

Question 17

‘The change in total cost due to the production of an additional unit’ =

Answer 17

Marginal cost

Question 18

‘The total cost divided by the production rate’ =

Answer 18

Average cost (or unit cost)

Question 19

‘The increase in output arising from an additional unit of an input’ =

Answer 19

Marginal product

Question 20

‘The change in total revenue arising from selling an additional unit’ =

Answer 20

Marginal revenue

Question 21

‘The scale where marginal revenue equals marginal cost’ =

Answer 21

Profit-maximizing scale of production

Question 22

‘A cost that has been committed and cannot be avoided’ =

Answer 22

Sunk cost

Question 23

‘Total revenue covers variable cost, or price covers average variable cost’ =

Answer 23

Short-run break-even

Question 24

‘A graph showing the quantity that a seller will supply at every possibly price’ =

Answer 24

Individual supply curve

Question 25

'The ability of a buyer or seller to influence market conditions' =

Answer 25

Market power

Question 26

'One seller in a market' =

Answer 26

Monopoly

Question 27

'One buyer in a market' =

Answer 27

Monopsony

Question 28

The 2 ingredients of market power:

Answer 28

1. Barriers to competition | 2. Elasticity of demand or supply

Question 29

4 methods of product differentiation:

Answer 29

1. Design 2. Function 3. Distribution 4. Advertising and promotion

Question 30

4 examples of intellectual property:

Answer 30

1. Patent 2. Copyright 3. Trademark 4. Trade secrecy

Question 31

'...gives the owner an exclusive right to an invention for a specific period of time' =

Answer 31

Patent

Question 32

'...provides exclusivity over published expressions for a specified period over time' =

Answer 32

Copyright

Question 33

'...provides exclusivity over words or symbols associated with a good or service' =

Answer 33

Trademark

Question 34

'...provides exclusivity over information that is not generally known and that provides commercial advantage' =

Answer 34

Trade secrecy

Question 35

'units sold other than the marginal unit' =

Answer 35

Inframarginal units

Question 36

'The scale at which the marginal revenue balances the marginal cost' =

Answer 36

Profit-maximizing scale of production

Question 37

'Total revenue less variable cost' =

Answer 37

Profit contribution

Question 38

'Price less marginal cost' =

Answer 38

Incremental margin

Question 39

'The ratio of incremental margin to price' =

Answer 39

Incremental marginal percentage

Question 40

'the percentage by which the demand will change if the seller's advertising expenditure rises by 1%, other things equal' =

Answer 40

the advertising elasticity of demand

Question 41

'Incremental margin percentage multiplied by advertising elasticity of demand' =

Answer 41

Profit-maximizing advertising-sales ratio

Question 42

'A market with a small number of sellers who behave strategically' =

Answer 42

Oligopoly

Question 43

'a list of players' strategies where each player is doing the best she/he can, taking the strategies of other players as given' =

Answer 43

Nash equilibrium

Question 44

'A market with two sellers who behave strategically' =

Answer 44

Duopoly

Question 45

'Sellers produce at constant marginal cost with unlimited capacity, and compete on price to sell a homogenous product' =

Answer 45

Bertrand oligopoly

Question 46

'Sellers compete on price to sell a product differentiated by distance from consumer' =

Answer 46

Hotelling oligopoly

Question 47

'Demand given the actions of competing sellers' =

Answer 47

Residual demand curve

Question 48

'A seller's best action as function of competing sellers' actions' =

Answer 48

Best response function

Question 49

'An adjustment by one party leads others to adjust in same direction' =

Answer 49

Strategic complements

Question 50

'The leader commits to pricing so low that a potential competitor cannot break even' =

Answer 50

Limit pricing

Question 51

'Sellers compete on production capacity to sell a homogenous product' =

Answer 51

Cournot oligopoly

Question 52

'An adjustment by one party leads others to adjust in the opposite direction' =

Answer 52

Strategic substitutes

Question 53

'Both leader and follower sell a homogenous product, and the leader commits to some capacity to grab a larger share' =

Answer 53

Stackelberg oligopoly

Question 54

'An agreement to restrain competition' =

Answer 54

Cartel

Question 55

'A strategy that generates worse consequences than some other strategy, in all circumstances' =

Answer 55

Dominated strategy

Question 56

'A strategy that does not involve randomization' =

Answer 56

Pure strategy

Question 57

'A strategy where a pure strategy is chosen according to a specified probability' =

Answer 57

Randomized strategy

Question 58

'A situation where one party can be better off only if another is worse off' =

Answer 58

Zero-sum game

Question 59

'A situation where one party can be better off without another being worse off' =

Answer 59

Positive-sum game

Question 60

OEM stands for:

Answer 60

Original Equipment Manufacturer

Question 61

SKU stands for:

Answer 61

Stock-Keeping Unit